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Takeover deterrent effect of on-market share buyback

conference contribution
posted on 2009-01-01, 00:00 authored by Dong Doan, Chee Yap, Gerard Gannon
This study examines whether Australian firms use on-market share buybacks to deter unwanted takeover risk from the stock market. We found a statistically significant and positive relation between a firm’s ex-ante takeover probability and its on-market share buyback activities. The result is robust to alternative modelling techniques, namely TOBIT and Censored Quantile Regressions. This could be partly explained by Brown and O’day (2007) hypothesis on dividend payout, that in a non-classical taxation system like Australia, yield of share buyback is positively related to dividend payments. However on-market share buyback activity is closely related to temporary cash flows rather than permanent operating cash flows. This might indicate that besides dividend payments, Australian firms might take advantage of the financial flexibility of share buybacks to redistribute non-permanent cash flows to their shareholders.

History

Event

Pacific Basin Finance, Economics, Accounting and Management. Conference (17th : 2009 : Bangkok, Thailand)

Publisher

School of Business, UTCC

Location

Bangkok, Thailand

Place of publication

Bangkok, Thailand

Start date

2009-07-01

End date

2009-07-02

Language

eng

Publication classification

E1 Full written paper - refereed

Copyright notice

2009, PBFEAM

Title of proceedings

PBFEAM 2009 & ICBA 2009 : Conference proceedings

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